Blog outlining massive fraud in the Australian listed investment company (LIC) and broader financial sector

Thursday, 11 September 2014

The van Eyk circular investment scam collapses

van Eyk runs a circular investment cartel, with its listed and unlisted funds "investing" in each other instead of in actual assets, as first exposed by this blog post in November 2013. This related party fraud has been used to inflate management fees, overstate assets and control "market" prices. The cartel includes the listed van Eyk Blueprint Alternatives Plus (VBP.AX), in which cartel funds Blueprint Balance, Blueprint Capital Stable and Blueprint High Growth "invested". According to its latest annual report, these related parties held 67% of units in VBP as at June 2014. These three van Eyk funds also "invested" in the Blueprint International Shares Fund, which in turn "invested" money with related party hedge fund Artefact Partners, linked to current and past cartel members.

In August 2014, it was revealed that Artefact Partners had not invested as mandated, but instead funneled entrusted funds to an illiquid property fund, in all likelihood a related party of the Artefact criminals. This was in direct contravention of fund disclosure statements, constituting an open and direct act of fraud. Cartel associate Macquarie Investment Management was forced to suspend redemptions on the four van Eyk funds, in its capacity as responsible entity. The rats then started fleeing the sinking ship, with van Eyk's asset consultant team exiting under undisclosed circumstances. Investor outflows led Macquarie to terminate a further nine van Eyk cartel funds, and class action lawyers started to circle the disintegrating fraud scheme. Without related parties to fix its "market" price, VBP went bidless.

By engaging in transactions designed to benefit themselves, to the detriment of unitholders, the cartel directors breached their duty of care and committed fraud. The circular transactions and related party "investing" between van Eyk funds was criminal, regardless of any small print included in product disclosure statements. Past and present cartel directors are all jointly guilty of this fraud. The fingerpointing between the criminals predictably commenced quickly. Laughably, the managing director of van Eyk claimed he had "no idea" why Artefact would engage in related party fraud. Could it be for personal gain perhaps? After all, this is the exact same reason he himself committed securities fraud, so perhaps some self-reflection is in order.

Over the years, the van Eyk cartel criminals have siphoned millions of dollars from granny investors, by circularly "investing" in related party intermediaries instead of real assets. Even if the van Eyk funds are shuttered, this is no way means no money has been lost. If not for the fraud, every small investor in van Eyk funds would have had higher returns over the years, and they should be reimbursed after forensic accounting. This will of course never happen. ASIC protected the van Eyk cartel for years, and still protects numerous other related party fraud schemes following the exact same template. Most significantly, the implosion of the $800m circular investment scam received next to no mainstream media attention, despite its monumental implications. This debacle will be swiftly and silently swept under the carpet.